The present invention relates to a method of presenting a portfolio and its apparatus as well as its system, and particularly to a method of optimizing the portfolio.
As a method of optimizing a portfolio, a method utilizing an efficient frontier based on the “portfolio selection” has been known. An efficient frontier is a set of portfolios obtained by providing various levels of expected earnings as given conditions and minimizing the corresponding variance or volatility. For convenience such approach will be called hereunder as “method of minimizing volatility”.
In the portfolio selection mentioned above, the volatility is representing the concept of risk. However, from a standpoint of an investor, the fact that return is falling short of a target level is the very risk. A downside risk model, which is based on such a standpoint and is taking up the statistic of the Lower Partial Moment (LPM) or the like as a risk, is known. The method of optimizing the portfolio based on the downside risk model will be called hereunder for convenience as “method of optimizing downside risk”.
In the method of volatility minimizing method and the downside risk minimizing method mentioned above, although they differ from each other in how the risk is grasped, they are same in evaluating the portfolio with two parameters of expected return and risk. Whichever approach may be employed, when a portfolio is configured with assets which are subject to price fluctuation in the market being taken in, it will be necessary to make a prediction of future market prices. However, unless the precision in the prediction of market fluctuations is very high, it will be questionable whether the optimum portfolio obtainable meets the expectation of an investor or not.
Therefore, when such a method of optimizing the portfolio is applied particularly to an investment of a short time period such as a few years, after a certain portfolio is selected out of the optimum portfolios obtained by such a method, the selected portfolio is operated principally by applying the buy and hold strategy, and then the asset universe is regulated or replaced in every fixed time period (for example, semiannually or annually). That is, a variance in profit status is covered by taking the change in the market during the operating period into the portfolio in every fixed time period.
The continuous application of the optimization in every fixed time period does not always realizes an optimization throughout the entire investment period, in general. In other words, there could be a discordance between the period of operation and a conventional optimization method, particularly in an operation for a short time period such as a few years.
The inventors of the present invention believe that an introduction of a new optimization method which maximizes the excess return at the time when the investment is completed is necessary, while countering the downside risks.